Why chip maker Qualcomm's stock fell despite a great quarter
Auto and IoT segments showed real growth as Qualcomm diversifies from smartphones.
Qualcomm posted the kind of quarter most companies would be proud of for its fiscal third quarter, which ended June 29. Revenue was up, earnings beat expectations, and growth across its major segments showed that its long-term bets are starting to pay off. But the market wanted more.
Shares slipped over 4% in after-hours trading on Wednesday, not because the results were disappointing, but because the outlook didn’t excite.
The numbers themselves were solid. Revenue rose 10% year over year to $10.37 billion, just ahead of estimates. Net income reached $2.67 billion, or $2.43 per share on a GAAP basis, up from $2.13 billion, or $1.88 per share, a year earlier. Adjusted earnings landed at $2.77 per share, beating the Street’s $2.71 forecast.
Beyond smartphones, Qualcomm's bets on automotive and IoT pay off
Its core chip business, QCT, brought in $8.99 billion. Handsets remained the biggest contributor, climbing 7% to $6.33 billion. But what stood out was the strength in other areas. Automotive revenue jumped 21% to $984 million. IoT surged 24% to $1.68 billion. Together, those two now account for nearly 30% of QCT’s total revenue, a clear sign that Qualcomm’s push beyond smartphones is gaining real traction.
Qualcomm has been working for years to diversify away from the handset cycle, and now its investments in connected vehicles, industrial systems, and smart devices are delivering real returns.
“We’re seeing continued strength in automotive and IoT, which supports our long-term diversification strategy,” CEO Cristiano Amon said. “These results give us confidence in the revenue targets we’ve set going forward.”
Meanwhile, licensing, long a consistent profit driver, added $1.32 billion to the quarter. The company also returned $2.7 billion to shareholders through dividends and buybacks.
Why did Qualcomm's stock fall despite a great quarter?
By all measures, the company executed well. So why the market reaction? It came down to sentiment around guidance for the coming quarter. For the fourth quarter, Qualcomm expects revenue between $10.3 billion and $11.1 billion and earnings per share between $2.75 and $2.95. That’s roughly in line with expectations, but for investors hoping for signs of acceleration, it felt like Qualcomm was simply holding ground.
The company pointed to macroeconomic uncertainty and cautious ordering from customers, particularly in the handset business, which continues to make up the largest piece of the pie. That’s not a red flag, but it’s not a green light either.
Even so, Qualcomm remains firmly positioned in several high-growth markets. Its expansion into connected vehicles, industrial IoT, and next-gen computing continues to open new revenue streams and reduce exposure to the more volatile smartphone cycle. The short-term outlook may be cloudy, but the long-term strategy is clearly taking shape.
